Extrapolation Has Arrived: CMS Finalizes Medicare Advantage Risk Adjustment Rule

CMS (Centers for Medicare & Medicaid Services) finalized a rule significantly influencing Medicare Advantage (MA) program payments. This final regulation, named “Medicare Advantage Risk Adjustment Data Validation Final Rule (CMS-4185-F2),” brings about two significant modifications that would alter the risk adjustment environment for Medicare Advantage organizations (MAOs). This article explores the nuances of the rule in great detail, evaluating its effects and providing advice on how MAOs should behave in the new setting.

Understanding the Medicare Advantage Risk Adjustment Rule

Medicare Advantage, also known as Medicare Part C, gives beneficiaries an alternative to standard Medicare by letting them sign up for commercial health plans that have an agreement with Medicare. The government pays these MA plans on a per-member, per-month basis, and they are subject to risk adjustment to consider changes in patient’s health status.
By adjusting for risk, MA plans can ensure that the payments they receive for participants with more complicated health needs accurately represent the actual cost of care. In the past, risk adjustment has calculated the correct payment rates and assessed patients’ health status based on information from their medical records.

Introducing Extrapolation: A Paradigm Shift in Risk Adjustment

The use of extrapolation for Risk Adjustment Data Validation (RADV) audits is the CMS’s most notable modification. In the past, audits concentrated on a subset of patient interactions, and any coding problems found were limited to the examined sample. However, CMS can statistically extrapolate the sample error rate to the total MAO population by extrapolation. If coding errors are common, this could have serious financial consequences for MAOs.

Under this new approach, CMS risk adjustment will employ statistical models to extrapolate risk scores to the whole plan membership to determine risk scores for MA plans. This approach is based on a combination of encounter and traditional fee-for-service data. This change attempts to lessen the administrative load on MA plans, expedite data-collecting procedures, and enhance the precision and timeliness of risk adjustment.

The Demise of the FFS Adjuster

The second significant modification is removing the Fee-For-Service (FFS) adjuster. CMS is nearing completion of its plan to forego using an FFS Adjuster during RADV audits. CMS primarily relies on its interpretation of the statutes governing the MA program to support its decision. CMS claims the ACA requires MA rates to be “actuarial equivalency” with FFS rates. These only apply to rates that have no bearing on an MA plan’s duty to disclose and reverse incorrect payments for diagnoses for which there is insufficient medical record support.

CMS finds consolation in a recent United Healthcare Insurance Company v. Becerra ruling. A False Claims Act case addressed the duty to report overpayments, and the U.S. Court of Appeals for the D.C. Circuit reached a similar finding. Interestingly, CMS expressly states that it was not dependent on its study on coding in FFS when it made its conclusion and did not use it as support for the final regulation. This action might be an attempt to prevent CMS and proponents of an FFS Adjuster from engaging in a “battle of the studies.”

The Impact on MAOs: A Multifaceted Issue

For MAOs, the application of extrapolation and the elimination of the FFS adjuster pose several difficulties:

  • Increased Financial Risk: If coding errors are common, extrapolation may result in significant financial penalties. If MAOs’ risk scores are lowered, they may have to repay substantially.
  • Increased Scrutiny: The new rule indicates that CMS will examine MA coding procedures more closely. MAOs must ensure their coding is correct and compliant to prevent audits and possible fines.
  • Administrative Burden: The new rules have complicated the risk adjustment procedure. MAOs should invest in thorough compliance programs, coder training, and coding audits to reduce risks.

Navigating the New Landscape: Strategies for Success

Despite the obstacles posed by the new rule, MAOs can flourish in this changing climate by implementing the following strategies:

  • Put Coding Accuracy First: Establish stringent programs for coding compliance that prioritizes the M.E.A.T. (Monitor, Evaluate, Assess/Address, and Treat) requirements. It is crucial to train coders regularly on the most recent ICD-10 coding criteria.
  • Accept Technology: If you have an EHR system, use HCC coding software. These technologies can expedite the coding process, increase coding correctness, and automate code suggestions.
  • Invest in Coding Audits: During RADV audits, proactive internal coding audits can find flaws before they become serious problems. Ongoing input to doctors and programmers encourages ongoing development.
  • Transparency and Documentation: Promote doctors to accurately record patient contacts and diagnoses in their clear, comprehensive documentation. This lowers the possibility of mistakes and enhances the basis for precise coding.
  • Remain Up to Date: Closely monitor industry updates and CMS risk adjustment recommendations regarding new regulations and compliant coding best practices. In our ever-changing world, it is imperative never to stop learning.

Collaboration is Key

Under the new norm, optimizing risk adjustment necessitates departmental cooperation within an MAO:

  • Teams for Coding and Compliance: To guarantee precise and compatible coding processes, these teams must collaborate.
  • Doctors and Practitioners: Accurate documentation reflecting medical circumstances requires teamwork and clear communication between physicians and coders.
  • Leadership and Management: Leadership plays a critical role in cultivating a culture of coding accuracy and compliance by assigning resources and encouraging best practices.

Embracing and Ensuring Sustainability

The CMS’s final regulation on risk adjustment represents a dramatic change in the MA environment. Through proactive measures, coding accuracy as a primary priority, and collaborative efforts, MAOs may effectively traverse the current landscape and guarantee the program’s financial sustainability. Recall that proper coding in healthcare payer software is necessary to ensure equitable compensation for the vital treatment you give patients with complicated chronic diseases, not only to maximize profits.

The new rule raises issues and emphasizes how crucial accurate coding is to equitable risk adjustment. MAOs ought to keep pushing for equitable and open risk-adjustment procedures. Future improvements may result from ongoing industry discussion and cooperation with CMS risk adjustment.

Wrapping Up

There will probably be more advancements in risk adjustment within the MA program. MAOs must be aware of upcoming legislative developments and push for a framework that compromises impartial risk assessment and equitable reimbursement procedures. MAOs may prosper in the dynamic environment of Medicare Advantage risk adjustment by adopting continual improvement in coding procedures, fostering departmental collaboration, and maintaining informed.

Taking this proactive stance guarantees that MAOs are fairly compensated for their services, enabling them to reinvest in quality enhancement projects and give the patients top-notch treatment. In the end, maintaining proper risk adjustment is not just about being financially sustainable but also about ensuring patients with complicated requirements get the resources they need in the constantly evolving healthcare environment.


I'm Harry, the passionate founder of My goal is to share insightful and engaging content with our readers. Enjoy our diverse range of articles!

Related Articles

Back to top button